“We have a difficult situation on the international financial markets rooted in the problems and troubles not only in Greece, but also further influenced by the situations in Spain and Portugal,” said Anders Borg, adding that Sweden is fully prepared for any worsening of the situation.
“The Financial Supervisory Authority [Finansinspektionen – FI] and the Riksdag [Sweden’s central bank] have stated that we have limited exposure to the relevant countries. Swedish banks are well capitalized and have an emergency preparedness that is resilient,” he said.
European investors breathed a sigh of relief after Germany’s parliament, the Bundestag, approved as much as 22.4 billion euros ($28.6 billion) in loans to Greece on Friday.
The Ministry of Finance has been in close contact with the Financial Supervisory Authority and the Riksbank in recent days. According to Borg, the responsible authorities have all the capabilities they need to address an emergency.
“The Riksbank has concluded that the market is functioning today, but has everything in place to ensure liquidity in the Swedish financial system, as it did a year ago,” said Borg.
Robert Bergqvist, chief economist at SEB, believes that many small investors will continue to quit the stock market during the day.
“It is the most likely scenario when you had so sharp movements in the U.S. yesterday and we had a big event in recent days,” said Bergqvist. “I cannot see anyone in this situation who would go in and take the opportunity to buy shares. As the situation stands, I think many will sit on the sidelines of the stock market today.”
While European investors breathed a sigh of relief after Germany’s parliament, the Bundestag, approved as much as 22.4 billion euros ($28.6 billion) in loans to Greece on Friday, the sells off of assets linked to the debt crisis in the euro zone continued. Share prices dropped across the board and foreign exchange markets reeled as investor fled to gold and the US$.
On the credit default swap (CDS) market, in which the protection buyer of the CDS makes a series of payments to the protection seller and, in exchange, receives a payoff if a credit instrument goes into default, risk premiums for Greece, Portugal and Spain continued to rise. In order to insure against Greece cancelling payments, one can pay 9.5 percent of the loan in insurance on the CDS market, 0.17 percentage points higher than on Thursday.
Prime Minister Fredrik Reinfeldt said that Sweden will continue to closely follow developments in Greece.